Update News October 04, 2017

In The News



World Bank forecasts Indonesia`s economy to remain strong
Antara News 04 October 2017

The World Bank has projected that Indonesias economy will remain strong and record an optimistic growth of 5.1 percent in 2017 and 5.3 percent in 2018.

"Indonesias economy can still grow more optimistically," World Bank Country Director for Indonesia Rodrigo Chaves noted at the launch of the latest Quarterly Economic Report in Jakarta on Tuesday.

Chaves said factors that will support Indonesias economy to grow more optimally are a conducive external environment, strong economic fundamentals, and progress in structural reforms.

"The basics to boost the Indonesian economy are good policy reform, strong domestic demand, and contribution from the external environment," he remarked.

He added that household consumption will grow stronger and contribute to the economy coupled with hike in real wages and increase in employment opportunities.

In addition, private investment benefited from a decrease in Bank Indonesias reference interest rate that resulted in lower borrowing costs as well as an improvement in the business environment and public investment in the infrastructure sector.

According to Chaves, infrastructure development is important, as it has had a positive impact on the investment sector since the fourth quarter of 2015.

"Better and more well-planned infrastructure will help Indonesia increase growth and equitable prosperity of more people," he said.

The World Banks Quarterly Economic Report also exposed some external risks, such as uncertainty arising due to the normalization of the Feds monetary policy, the weakening of commodity prices, and the protectionist trade policies implemented by developed countries, which could affect Indonesias economic growth.

Other risks arising from the domestic side will be the implementation of inconsistent structural reforms, which could have a negative impact on economic growth forecasts, as Indonesia will enter the year of politics in 2018


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Currency weakening happening globally: BI
Antara News 04 October 2017


Jakarta (ANTARA News) - The Indonesian central bank, Bank Indonesia (BI), stated that the weakening of currency exchange rates against the US dollar is happening globally and not only in rupiah.

It happens due to market players reaction to the United States tax reduction plan as well as the signal of US Federal Reserve monetary tightening policy at the end of the year and 2018.
Senior Deputy Governor of BI, Mirza Adityaswara, stated, after attending the Indonesian Chamber of Commerce and Industry (Kadin) National Congress in Jakarta on Tuesday, that the rupiah weakened 0.27 percent against the US dollar on Tuesday.

It is better than the Indian rupees weakening of 0.4 percent, the Japanese yens weakening of 0.33 percent, and the Singapore dollars weakening of 0.32 percent. 
The rupiahs exchange rate per day is only worse than Chinas renmimbi, which weakened 0.24 percent. "It means that weakening of currencies is happening globally," he explained.

According to Mirza, the weakening of this exchange rate has been widely predicted. The cause is, firstly, the plan of US President Donald Trump to reduce the amount of tax in US.
The policy, if approved by the Senate and the US Congress, is believed to boost US economic growth to lure investors to divert funds to the United States.

"With the economic recovery, there is the possibility that interest rates in the US will rise faster and then, the dollar will be pulled back," he noted.
The second cause is the statement by Feds Jannet Yellen statement last week that was hawkish and linked market participants to a potential rise in the Feds benchmark rate in December 2017.

The third culprit is the market players speculation about the Feds governing succession in 2018. There has been speculation among market participants that one of Yellens successor candidates is an economist named Kevin Warsh, who is bent on a tight monetary policy.

"It is always a topic in the financial markets," he added.
The exchange rate of rupiah at the interbank transactions in Jakarta on Tuesday morning dropped by 30 points to Rp13,570, compared to the previous position at Rp13,540 per US dollar (US).

BIs Jakarta Interbank US Dollar Spot Reference Rate on Tuesday morning also opened lower at Rp13,582 per US dollar.
The rupiah spot market was at Rp13,540 per US dollar on Tuesday afternoon.

Monetary analyst of Investindo Futures, Putu Agus, remarked that the high probability of a Fed Fund Rate hike pushed the US dollar to strengthen against the majority of the worlds currencies, including the rupiah.

"The US interest rate hike led to a shift in investor interest in safe-haven currencies, such as the US dollar," Agus explained. 


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Darmin: There is room for cutting lending rate
Antara News 03 October 2017


Jakarta (ANTARA News) - Coordinating Minister for Economy Darmin Nasution said there is still room or step that could be taken by the Financial Service Authority (OJK) to cut lending rates. 

"OJK could do something, other than Bank Indonesia cutting its BI 7-day Reverse Repo Rate," Darmin said here on Monday. 

He said OJK could push for rate cut to adjust to the central banks reference interest rate , which has been cut to 4.25 percent.
He said the financial industry watchdog once took similar measure by giving facility to the banking industry in a bid to reduce the non performing loan (NPL) ratio.

Credit base interest rate (SDBK) was once adopted by Bank Indonesia, he cited, adding OJK could set benchmark to force bank to cut their lending rates. 

OJK chief Commissionner Wimboh Santoso said commitment with the banking industry is needed as this sector is not sufficient enough with high operating cost contributing to an increase net interest margin.


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VP Jusuf Kalla Confident of Freeport Divestment Deal
Tempo.co  04 October 2017


TEMPO.CO, Jakarta - Vice President Jusuf Kalla is confident of Freeport divestment deal.“We will hold another negotiation,” Vice President Jusuf Kalla said yesterday after inspecting Gelora Bung Karno Stadium in Jakarta.

The remark was made to answer the question about Freeport’s rejection of divestment proposal offered by the government. Kalla is confident that an agreement will be reached with Freeport.

As reported before, Freeport-McMoRan Copper & Gold Inc. rejected a divestment scheme proposed by the government on August 29.
Bambang Gatot, Director General of Mineral and Coal, the Energy Ministry, said that proposal rejection is commonplace in a negotiation.

He said that the government will be persistently seeking Freeport divestment deal based on the Government Regulation No. 1/2017.
“Divestment and its taxation terms will be arranged by the Finance Ministry. We, the Energy Ministry, will only facilitate them,” he explained about Freeport.

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Govt Repeals Moratorium on Islet G in Reclamation Project
Tempo.co  04 October 2017


TEMPO.CO, Jakarta - A coordinated meeting of the Maritime Ministry yesterday decided to repeal a moratorium on Islet G in the Jakarta Bay reclamation project. 

The Coordinating Minister for Maritime Affairs Luhut Binsar Pandjaitan said that the developer has met the requirements set by the government. “There is no more complaint about Islet G. All requirements have been met,” Luhut said after the meeting.

According to Luhut, the Environment and Forestry Ministry today will summon PT Muara Wisesa Samudra, the developer of Islet G and a subsidiary of property giant Agung Podomoro Land. 
The ministry will confirm the developer’s commitment to meet its obligations. “It will be concluded tomorrow; I will sign it. If not Tuesday, it’ll be Wednesday,” he said.
The Environment Ministry halted Islet G reclamation in May last year.

It had told the developer the revise the environmental assessment analysis (amdal) and reclamation permit. The government had also warned of disruption of vital objects, such as coal-fired power plant (PLTGU) Muara Karang and Pertamina gas pipelines, due to sand dredging.

Environment and Forestry Minister Siti Nurbaya said that the government has decided to repeal the moratorium to provide certainty for the developer’s business. More so because the developer had met six requirements set by the government, she said. “Tomorrow [today] we will talk about the details. If all answers are right, we will immediately repeal the sanction,” she said.

Siti added that an environmental analysis document issued recently by Jakarta administration for Muara Wisesa will be used to monitor Islet G reclamation. 
The developer is also obliged to report the reclamation performance on a regular basis. “Failing that, we will freeze [the permit], we will repeal it again,” she said.

PT Muara Wisesa Samudra Project Director Andreas Leodra said that the development Islet G will not necessarily be easy despite the impending moratorium repeal. 
The company will need to hold more talks with contractors, for example, to procure foreign ships and other equipment. “It will take months to resume [the project],” Andreas said.

Tigor Hutapea, the coordinator of the so-called Coalition for Jakarta Bay, has urged the government to explain the reasons behind the moratorium repeal. 
He said that those who oppose the reclamation project had never been involved in the government’s decision-making policy. “There’s secrecy,” he said.


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Kadin kicks off national meeting
The Jakarta  Post 03 October  2017 


Indonesia’s Chamber of Commerce and Industry's (Kadin) 2017 National Meeting kicked off on Tuesday, involving some 1,000 participants, including Trade Minister Enggartiasto Lukita.
Kadin is Indonesia's biggest business lobby group, whose establishment is acknowledged in the country's law.

Participants of the annual meeting include businesspeople dealing in various sectors, business associations and related ministries and officials.
"We'll gather strategic input from the business sectors to be synergized with government policies," Kadin chairman Rosan P. Roeslani said in a statement.During the event, participants are grouped in 14 group discussions based on their respective sectors. Each group discussion is expected to come up with recommendations for the government based on the theme.hhhhh

The group discussions cover all sectors, including energy and electricity; the finance industry; regional development; industry and trade; micro, small and medium enterprises (MSMEs) and cooperatives and startups; agriculture and agribusiness; logistics and transportations; tourism; state enterprises, social corporate responsibility and business competition; construction and infrastructure; education and health and manpower issues; property and economic zones; women empowerment and sports; as well as international relations. 


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Tax office to collect taxes on hidden wealth
The Jakarta Post 03 October  2017 

The tax office has said that its officials will start collecting taxes from hidden wealth, assets that were not included in annual tax reports, which will be treated as new income and charged with a higher tariff.

Directorate General of Taxation spokesman Hestu Yoga Saksama stressed that the targets of the regulation were those who did not report their wealth and did not take part in the nine-month tax amnesty.

“For nine months, we intensively called on taxpayers to utilize the tax pardon. It is time now to enforce the law, particularly for those who did not take part in the program. We will track them down,” the official said as reported by tribunnews.com on Monday.

To arm the tax officials, the government has issued Government Regulation No. 36/2017 on tax collection over hidden wealth that is treated as income.
Hestu expressed his optimism that the new program would boost state revenue, which was targeted at Rp 1.26 quadrillion (US$94.51 billion) by the end of this year.

As of August, the tax office has collected Rp 685.6 trillion, or 53.5 percent of the target.
In the last four months, it has collected Rp 597 trillion to meet the target. From about 124 million working citizens, the government has recorded only 32 million taxpayers. 


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Go-Jek to expand operations in four ASEAN countries
The Jakarta Post  03 October  2017 

Ride hailing application Go-Jek plans to operate in four other member countries of the Association of the Southeast Asian Nations (ASEAN) as part of its efforts to expand its business in the region.

Go-Jek founder and CEO Nadiem Makarim did not specify the destination countries of his company’s forthcoming investment, but he has previously mentioned that money would go to countries with large populations and those that still relied on cash transactions.

“So far, we have held off operating [outside Indonesia]. It will be the first time we have faced tougher competition,” Nadiem said as reported by kompas.comon Monday.
He, however, did not mention the amount of the money to be invested and when the investment would commence.

Go-Jek’s main competitor, Grab, which is based in Singapore and operates in seven countries, recently received financing from SoftBank Group and Didi Chuxing from China.
Nadiem said his company had a platform that was fit for investing in countries whose economies were not yet well developed and still lacked infrastructure.  


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